Stock Name: BHIC
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS
Boustead Heavy Industries Corp Bhd
(March 24, RM3.94)
Initiating coverage at RM3.80 with buy rating and target price of RM6.55: BHIC specialises in the construction of naval vessels, defence services, and oil and gas fabrication. It completed a major restructuring in 2007 and is now on a strong footing to bag major contracts, given its track record in delivering government and private sector jobs. We expect a significant re-rating from its bargain basement valuation of seven times FY12 earnings per share and 1.5 times price-to-book value, on the back of two-year EPS compound annual growth rate of 39%. Its balance sheet is also healthy with 0.24 times net gearing.
BHIC enjoys strong government patronage, especially from the Royal Malaysian Navy (RMN). Its current RM1.7 billion order book could more than double upon conversion of the letter of intent for the next next offshore patrol vessels (OPV), assuming 30% of the work is subcontracted to BHIC. This will provide strong earnings visibility for the next seven years. The company entrenched its execution record after delivering the first batch of six OPVs in December 2010. We also expect more contract wins from its current RM1 billion tender book. BHIC can also leverage on its global defence partners ' DCNS, Rheinmetall and MTU Friedrichshafen ' via joint ventures to penetrate other military segments. It is possible in the medium term for BHIC to increase its stake in BN Shipyard given the role of BHIC as the listed heavy engineering proxy of Boustead Holdings and the complementary roles played by both BN Shipyard and BP Shipyard operationally. Our new order win assumptions are conservative at RM600 million per year for FY11/13F while the six OPV contract assumption is tagged at RM7 billion.
As one of seven Petronas licensed fabricators, BHIC is poised to benefit from the booming oil and gas industry. With Petronas emphasising the local front, and strong news flow on marginal oil field and brownfield services and deepwater development, fabricators will be the first beneficiary of the cycle. ' Hwang-DBS Vickers Research, March 24
This article appeared in The Edge Financial Daily, March 25, 2011.
Company Name: BOUSTEAD HEAVY INDUSTRIES CORP
Research House: HWANGDBS
Boustead Heavy Industries Corp Bhd
(March 24, RM3.94)
Initiating coverage at RM3.80 with buy rating and target price of RM6.55: BHIC specialises in the construction of naval vessels, defence services, and oil and gas fabrication. It completed a major restructuring in 2007 and is now on a strong footing to bag major contracts, given its track record in delivering government and private sector jobs. We expect a significant re-rating from its bargain basement valuation of seven times FY12 earnings per share and 1.5 times price-to-book value, on the back of two-year EPS compound annual growth rate of 39%. Its balance sheet is also healthy with 0.24 times net gearing.
BHIC enjoys strong government patronage, especially from the Royal Malaysian Navy (RMN). Its current RM1.7 billion order book could more than double upon conversion of the letter of intent for the next next offshore patrol vessels (OPV), assuming 30% of the work is subcontracted to BHIC. This will provide strong earnings visibility for the next seven years. The company entrenched its execution record after delivering the first batch of six OPVs in December 2010. We also expect more contract wins from its current RM1 billion tender book. BHIC can also leverage on its global defence partners ' DCNS, Rheinmetall and MTU Friedrichshafen ' via joint ventures to penetrate other military segments. It is possible in the medium term for BHIC to increase its stake in BN Shipyard given the role of BHIC as the listed heavy engineering proxy of Boustead Holdings and the complementary roles played by both BN Shipyard and BP Shipyard operationally. Our new order win assumptions are conservative at RM600 million per year for FY11/13F while the six OPV contract assumption is tagged at RM7 billion.
As one of seven Petronas licensed fabricators, BHIC is poised to benefit from the booming oil and gas industry. With Petronas emphasising the local front, and strong news flow on marginal oil field and brownfield services and deepwater development, fabricators will be the first beneficiary of the cycle. ' Hwang-DBS Vickers Research, March 24
This article appeared in The Edge Financial Daily, March 25, 2011.
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